Ever wondered how your employer decides the tax cut from your salary? That deduction is TDS under Section 192. Unlike other TDS sections, it has no flat rate — it is based on your own estimated income and tax. Here is how it works.

What is Section 192?

Section 192 requires every employer to deduct income tax from salary at the time of payment. The deduction is made at the employee’s average rate of income tax for the financial year — that is, the total estimated tax on your projected annual salary, spread evenly across your pay periods.

How the monthly TDS is calculated

Your employer follows these steps:

1. Estimates your total salary for the year, including allowances and perquisites.
2. Applies the standard deduction and any eligible exemptions/deductions you declare.
3. Computes the annual tax under your chosen regime (the new regime is the default).
4. Divides that tax across the remaining months and deducts it each month.

Because it is an average rate, there is no single percentage — a person earning ₹6 lakh and one earning ₹30 lakh face very different effective rates.

What you should do as an employee

Declare your tax regime and, if you choose the old regime, submit investment and expense proofs (80C, 80D, HRA, home loan interest) to your employer on time. You can also report other income (like interest) so the right tax is deducted. If you do not provide your PAN, TDS is deducted at a flat 20% under Section 206AA.

Form 16: your proof of TDS

Your employer deposits the TDS monthly, files a quarterly return in Form 24Q, and issues you Form 16 each year (by 15 June). Form 16 summarises your salary, deductions and TDS, and is the key document for filing your ITR. Always reconcile it with Form 26AS and your AIS.

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Frequently Asked Questions

At what rate is TDS deducted on salary?

There is no fixed rate. Under Section 192, TDS is deducted at your average rate of tax — the total estimated annual tax on your salary divided across the year.

What if I don’t give my PAN to my employer?

TDS on your salary will be deducted at a flat 20% under Section 206AA, which is usually higher than your normal rate.

When will I receive Form 16?

Employers must issue Form 16 by 15 June following the end of the financial year. It is your certificate of salary paid and TDS deducted, used to file your ITR.